Analyst Howard Wheeldon considers National Express’s struggles and the future for the rail industry

In the face of falling passenger demand on its East Coast main line and in anticipation of running up first-half losses of around £20 million, it seems that National Express has effectively walked away from the important and seemingly valuable franchise it was awarded back in 2007.

Back to coaches and buses then which require considerably less investment, offer better returns and half-decent cash flow to boot.

Quite amazing really given that the bulk of National Express problems can probably be put down to over- expansion, a failed or questionable management and strategy over very many years – right back to when the big coach operator was bought out by its management in 1988 and fully privatised four years later – and of course, the taking on of far too much debt.

One might argue that what this failure boils down to is that National Express is simply not, or probably never was, fit for purpose.

Arguably National Express should never have been given the wretched line by the government in the first place! Easy to say but given that they produced the best offer to government it was probably hard to ignore.

But the problem that hit the National Express rail franchise should have been manageable by a fit-for-purpose company that had planned sufficiently for medium and long-term eventualities and that had sufficient resources. Not this one though. Sales begin to fall, something is going seriously wrong, so that means going cap in hand to government for the whole blessed thing to be renegotiated.

Quite ridiculous really but then this is exactly what successive governments have encouraged year after year – short-term thinking, short-term solutions to problems that will always be long-term.

Nevertheless National Express were probably quite shocked that instead of re-opening talks the government pulled the East Coast franchise away from the rail operator without a word of warning.

The government just doesn’t want any more adverse headlines of criticism meaning it was easier to take the franchise back into the State.

National Express isn’t the first to walk away or to be sacked from running a rail franchise of course and given memories of Connex and GNER, it surely won’t be the last.

Few will have forgotten the disgraceful collapse of Railtrack and that sadly bore too many hallmarks of the Treasury doing its worst behind the scenes. Put all these together and into context and we may soon have to conclude that despite the odd franchise success such as Chiltern Rail, rail privatisation in the UK really was a failure waiting to happen.